As much as Wells Fargo & Co. wants the public to believe it has put its troubled past behind it, yet another legal tangle shows it still doesn’t have a handle on its own questionable behavior.
In the latest turn of events, the Department of Justice has started an investigation into whether Wells Fargo colluded with developers to submit low-ball bids on tax credits that support low-income housing projects, according to people close to the matter who were not authorized to discuss it publicly. The probe started in Miami but has now been referred to the corruption unit of the Department of Justice, which is looking into deals involving Wells Fargo nationwide, one of these people said.
(Related: A Timeline of Wells Fargo’s Scandals)
The U.S. Attorney’s office in Miami convened a grand jury recently to look into the accusations against Wells Fargo, according to one of the people close to the investigation. Subpoenas have been issued to Wells Fargo, these people said, as well as to other developers looking for information on the deals they have done with the bank.
Assistant U.S. Attorney Michael Sherwin, who has been investigating fraud in the low-income housing tax-credit program in Florida for the past few years, declined to comment on Wells Fargo specifically but said that his investigation was continuing and that it was looking at the full industry, including syndicators and lenders. “We see potential anomalies in the purchase prices that suggest theft,” said Sherwin, who has brought previous cases against developers.
Michael Cox, a former low-income housing developer in Miami who was prosecuted in an earlier case, said he was aware that Wells Fargo is under investigation and that he is cooperating in the inquiry.
The Department of Justice is looking into other banks as well, according to two people close to the matter. But the case against Wells Fargo is the furthest along and will be the initial focus of the tax-credit probe. Last week, Wells Fargo disclosed in a financial filing that government agencies were looking into its purchase and negotiation of the tax credits but did not elaborate or identify the agencies.
The bank said in a statement, “Wells Fargo is committed to providing financial solutions to support the development and rehabilitation of affordable multifamily housing in areas where there are the biggest needs. Our investment in affordable housing has helped improve access to housing in cities across the country.” The bank declined to comment specifically on the tax-credit probe.